As a business owner, having a solid commercial insurance policy is an essential aspect of operations. Even with the right insurance coverage, accidents or incidents can still happen, and when they do, commercial property owners should have a good idea of how to navigate the commercial claims process to make sure that they get a fair settlement. In this blog, we’ll cover everything that you need to know about commercial insurance claims.
The Commercial Claims Process Overview
When a business experiences a covered event, it’s important to file a claim with their insurance provider as soon as possible. The claims process can vary depending on the insurance provider, but here are some general steps that businesses should follow:
- Notify your insurance company: As soon as possible after the event, you should notify your insurer of the what happened and provide as many relevant details as possible
- Document the damage: Before doing any sort of clean-up, you must document the damage(s). Make sure to also keep all receipts and other relevant documents.
- Cooperate with the claim investigation: Once the claim is filed, an insurance adjuster will be assigned to investigate the claim and determine the amount of compensation the business is entitled to.
- Coverage determination: Once the claim investigation is completed, your insurance will either issue a payment or deny the claim. You may need to request supplemental payments or appeal the decision, depending on your specific case.
Types of Commercial Insurance Claims
Commercial insurance claims can vary depending on the type of policy a business has. Here are some of the most common types of commercial insurance claims:
- Property Damage Claims: Property damage claims can arise from a variety of incidents, including fires, floods, storms, and vandalism. These claims will encompass the cost of repairing or replacing damaged property, such as buildings, equipment, and inventory.
- Liability Claims: Liability claims come about when a business is held responsible for injuries, property damage, or other losses suffered by a third party. Liability claims usually will involve “slip and fall” accidents, product liability, or other incidents that would result in bodily injury or property damage.
- Workers’ Compensation Claims: Workers’ compensation claims cover employees who suffer injuries or illnesses while on the job. These claims are usually revolving around medical expenses, lost wages, and rehabilitation costs.
- Business Interruption Claims: Business interruption claims cover losses incurred when a business is forced to shut down due to a covered event. What “covered event” means will depend on your specific commercial property insurance policy, but usually refer to natural disasters, fires, or other unexpected events.
Common Commercial Property Insurance Coverages
Not all businesses require the same kinds of insurance coverage, even if they’re insured under the same coverage form. The standard coverage form for business owners is referred to as the Business and Personal Property coverage form (aka, BPP). The main insuring agreement of the BPP states that the insurer will pay for direct physical damage to covered property at the described premises resulting from a covered cause of loss. What this basically means that before any claim for property loss could be paid, the damaged property in question has to be shown to qualify as covered property.
Building
Buildings or structures covered by the policy are most often listed in the Declarations page of your commercial insurance policy.
The definition of “building” in the BPP includes these elements:
- Completed additions to covered buildings
- Fixtures (also includes outdoor fixtures)
- Permanently installed machinery and equipment
- Personal property owned by the insured and used to maintain or service the building or its premises (for example, fire-extinguishing equipment; outdoor furniture; floor coverings; and equipment for for ventilation)
Also, if these are not already insured under another policy, the building description covers additions, alterations, or repairs in progress, including materials, equipment, and supplies used in connection with that work. In order for these to be covered, they must be located within 100 feet of the described premises to be covered by the policy.
Your Business Personal Property
The Business Personal Property policy covers personal property owned by insured(s) for use in their business.
For this coverage to be applied, one of these must be true:
- The property must be located in or on the described building.
- The property must be located in the open (or in a vehicle) within 100 feet of either the building or structure or of the described premises, whichever distance is greater.
Unless it is excluded under the Property Not Covered section (more on that below), the BPP includes furniture and fixtures, machinery and equipment, “stock” (for example, merchandise, raw materials, goods in process, and finished goods), and all other personal property owned by the insured and used in the insured’s business, and also includes labor, materials, or services furnished by the insured on personal property of others.
Leased personal property for which the named insured(s) would have a contractual responsibility to provide insurance for would also be covered. For example, a phone or computer equipment leased by the insured under an agreement requiring the insured to purchase insurance on the equipment.
Even though improvements and betterments actually become part of the building, the insured(s) interest in these is also covered.
Personal Property of Others
The Personal Property of Others coverage protects against loss of or damage to this type of property under certain conditions, and applies whether or not the insured(s) is legally responsible for the damages:
- While the property is in the insured’s care, custody, or control.
- While the property is in or on the building described in the declarations or within 100 feet of either the building or structure or of the described premises, whichever distance is greater.
Common Exclusions From A Commercial Property Insurance Policy
Certain property or kinds of property losses don’t qualify as covered property. These will be listed in the BPP’s Property Not Covered section.
Some kinds of property are excluded from coverage because they are:
- Illegal to insure
- Much less susceptible to loss by most of the perils insured against (such as building foundations below the lowest basement floor or the surface of the ground, retaining walls that are not part of a building, and underground pipes)
- Able to be insured more advantageously under other forms (such as money, securities, automobiles, and aircraft)
Insurance can be made available for almost everything listed in the Property Not Covered section through endorsements.
Negotiating A Fair Settlement For Your Commercial Property Claim
Here’s a step-by-step guide to help you negotiate a fair settlement for your commercial property claim:
1. Seek Representation/Expert Consultation: Commercial claims are much more complicated than residential property claims (which can be pretty complicated themselves). If you want to get a fair settlement in the shortest amount of time, you should consider hiring a Public Adjuster or Property Insurance attorney to review your file and also consult with other experts. Handling a commercial claim really requires an interdisciplinary approach due to the different coverages that are in play.
2. Document the Damage: Thorough documentation is the foundation of a successful claim negotiation. Make sure that you have clear photos, videos, and written descriptions of all damages. Retain experts to document both visible and hidden damage(s).
3. Estimate the Losses: Make sure to keep track of not only structural damage but also business interruption costs, loss of income, and additional expenses incurred as a result of the covered loss. Consider consulting with professionals such as contractors, appraisers, and accountants to ensure your estimation is comprehensive.
4. Repair Documentation: Compile all the relevant documents for your claims such as repair estimates, invoices, receipts, and expert assessments.
5. Be Prepared for Inspection: The insurance company will more than likely send an independent adjuster to assess the damage on their behalf. Present your documentation and evidence to them and consider having your own representation (if you have it) to attend in your place.
6. Negotiate in Good Faith: Negotiation is a give-and-take process. This doesn’t mean you should compromise where you don’t need to, but it does mean that concessions might need to be made to reach a settlement. The best way to negotiate is by being firm yet reasonable with any requests, while backing up your claims with solid evidence.
7. Review Settlement Offers Carefully: If the insurance company offers a settlement, review it carefully. Ensure it covers all your documented losses and expenses. If you have concerns, always consult with an expert such as Public Adjuster or Property Insurance attorney.
8. Consider Alternative Dispute Resolutions: If negotiations stall-out, consider mediation or appraisal. Mediation involves a neutral third party facilitating discussions, while appraisal involves a third-party appraiser assessing the value of the damages. Be aware of any conditions that invoking one of these resolutions methods may have and their affect on your claim. If all else fails, you may need to litigate your claim.
In conclusion, commercial insurance claims can be complex and time-consuming, but with the right knowledge and support, businesses can navigate the process successfully. By understanding the types of claims, following the claims process, and working with an insurance broker, businesses can protect themselves from financial losses and ensure they receive the coverage they need in the event of an unexpected event.
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